Wealth is possessing assets of value. Money is merely a system for counting it. In my youth many kids said they planned to grow up to be millionaires but if those same kids, now adults, had a million dollars and nothing else, it would be tough for them to retire on it. I learned an early lesson in wealth from one of my favorite cartoon characters, Lucy, who when Charlie Brown asked what she wanted for Christmas responded, “Real Estate.” She understood wealth.
When I lived in Vegas in the 80’s bartering became very popular. In a relatively short period of time there were dozens of businesses offering the service. One such company was started by a family friend who often discussed the benefits of his brand. For bartering to work efficiently, every company created its own tokens to keep track of each participants’ value. About everything our friend bought he paid for with tokens, including food, furniture, clothing and even his car.
As an incentive to join the company this man offered me “free” tokens up front to help get me started. This was a standard recruiting practice for bartering companies. One day I got bold enough to ask him the obvious question every prospective participant should have been asking. Who controls the creation of the tokens? I went a bit further and asked what real asset or product he personally contributed to the company in order to obtain what seemed like the endless supply of tokens he was able to spend.
In his surprisingly honest answer, he told me there were no rules governing how many tokens he created for himself and his staff, or for new members, but that he tried to keep the flow consistent with the growth of the company. His answer did not give me confidence, so I declined to get involved.
Not many years passed before the various bartering companies began to fail, largely due to there being more tokens in existence than goods and services available. I remember one day my dad telling me that our friend had gone on a spending spree, trying to convert his pile of tokens into real assets before the whole thing collapsed. Printing too many had continually devalued them and everyone was beginning to figure it out.
As the U.S. government prints record amounts of dollars, I am wondering if some of those old bartering company execs ended up in politics. I don’t know who is getting all those dollars but it’s clear they are being rapidly converted into other assets viewed as being more dependable. If you are wondering why the stock and real estate markets keep going up in the face of continuing serious economic issues, keep in mind that they are valued by U.S. dollars, whose relative value keeps going down.
Investors, knowing the difference between money and wealth, have been converting one for the other. As you invest, remember to focus on owning things that create real wealth, not just holding methods of counting it, like dollars.
